City firms including Freshfields Bruckhaus Deringer, Linklaters and Slaughter and May are working with the Law Society to launch a last-ditch attempt to alter the Government’s money laundering directive.
At a round table event at the Law Society president’s official residence on Carey Street early last week, the society agreed to instruct counsel if eleventh-hour talks in Westminster fail to change the Government’s mind on the proposed legislation.
Donald Williams, consultant on compliance and conflicts at Linklaters, warned the meeting that the legislation in its present form “will be the UK’s Sarbanes-Oxley”.
Counsel could be instructed to give an opinion on the constitutional and Human Rights Act considerations raised by the Treasury’s proposed method of implementation. Sources have tipped Matrix Chambers to win the instruction.
The Third European Money Laundering Directive was adopted by the European Commission late last year and must be implemented into UK law by this December. However, the bill has been met with horror by City lawyers.
At the meeting the firms agreed to put the Law Society in contact with clients in banking and accounting to coordinate a message of opposition across the financial services.
The Law Society hopes to persuade the Government to include a workable definition of those described in the bill as having “beneficial ownership” in deals, whom law firms will be required to identify.
This is of particular concern to lawyers involved in private equity deals, where funds are frequently comprised of several sub-funds, often based overseas.
Slaughter and May practice manager David Frank observed that private equity accounted for 25 per cent of UK M&A activity. He warned that, if the legislation was passed in its present form, “private equity will simply say ‘forget this’ and go to New York”.